The renewal wave: what happens when a 2021 mortgage meets a 2026 rate

Most Canadian mortgages run on terms of five years or less inside an amortisation of twenty-five or thirty, so a household refinances repeatedly over the life of the loan. That structure is why a change in rates reaches borrowers in waves rather than all at once — and why 2025 and 2026 together account for an unusually large share of outstanding mortgages coming up for renewal.

The cohort that matters is the one that signed in 2020 and 2021, when five-year fixed rates were at their historic low. Those contracts are maturing into a market where the Bank of Canada’s policy rate is 2.25 per cent and retail five-year fixed rates are several points above the ones being replaced.

What actually determines your number

Three things, and the third is the one people forget. The rate you are coming off, the rate you are going to, and the fact that you have been paying the mortgage down for five years — the balance being refinanced is smaller than the one originally borrowed, and the remaining amortisation is shorter, which pulls in opposite directions.

The result is that renewal outcomes vary far more than the headlines suggest. A borrower who took a five-year fixed in 2021 faces a meaningful increase. A borrower who took a short term at the peak of rates in 2023 may be renewing into something lower. Variable-rate borrowers on fixed payments are the group most exposed, because their payment has not been absorbing the changes as they happened.

The practical part

Run your own number before the lender runs it for you. You can do this today: the balance is on your statement, the remaining amortisation is known, and current rates are published. A renewal offer arriving in the mail is the beginning of a negotiation, not the end of one, and switching lenders at renewal is ordinarily possible without re-qualifying under the stress test where the loan is simply transferred rather than increased.

Term length is the live decision. A shorter term costs more per month in many cases but does not lock the household into today’s rate for five years; a longer one buys certainty. Which is right depends on how much room the budget has, which is a question about the household rather than about the market.

Homula’s mortgage calculator uses Canadian semi-annual compounding rather than the monthly compounding common in American calculators. On a renewal-sized balance the difference is small but real, and it is the convention Canadian lenders actually use.